Project Report_Retreading Industry
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Report on the retreaded tyre industry in Kerala A Research
Pulkit Goswami STUDENT AT IMI, NEW DELHI
Contents Executive Summary ........................................................ ................................................................. ....................... 2 Acknowledgement .................................................................................................................................................. 2 Brief about RPSG – RPSG – Phillips Phillips Carbon Black Limited .............................................................................................. 2 Competitor Overview ............................................................................................................................................. 3 Retreaded Tyre Industry in India .......................................................... .............................................................. .... 3 Retreaded Rubber Types and Design ............................................................... ....................................................... 4 Literature Review ................................................................................................................................................... 4 ......................................................... ................................................................. .................................. 4 Project Brief .........................................................
Project Title ..................................................... ................................................................. .................................. 4 Activities Involved ............................................................................................................................................. 4 Outcome expected ...................................................... ................................................................. ....................... 4 Brief description of the concepts / models introduced in the s tudy ........................................................ ............ 4 Methodology Used ............................................................................................................................................. 4 Locations Visited ............................................................................................................................................... 4 Data Analysis and findings / results ................................................................ ........................................................ 6 Interpretations and conclusions / summary ................................................................ ........................................... 20 Recommendations ................................................................................................................................................ 22 Limitations of the study ............................................................. ................................................................. .......... 22 Scope for future improvements ............................................................. ................................................................ 22 References ............................................................................................................................................................ 23 Bibliography ......................................................................................................................................................... 23 Questionnaire ....................................................... ................................................................. ................................ 25 Experience & key learnings during the project .......................................................... ........................................... 37
Contents Executive Summary ........................................................ ................................................................. ....................... 2 Acknowledgement .................................................................................................................................................. 2 Brief about RPSG – RPSG – Phillips Phillips Carbon Black Limited .............................................................................................. 2 Competitor Overview ............................................................................................................................................. 3 Retreaded Tyre Industry in India .......................................................... .............................................................. .... 3 Retreaded Rubber Types and Design ............................................................... ....................................................... 4 Literature Review ................................................................................................................................................... 4 ......................................................... ................................................................. .................................. 4 Project Brief .........................................................
Project Title ..................................................... ................................................................. .................................. 4 Activities Involved ............................................................................................................................................. 4 Outcome expected ...................................................... ................................................................. ....................... 4 Brief description of the concepts / models introduced in the s tudy ........................................................ ............ 4 Methodology Used ............................................................................................................................................. 4 Locations Visited ............................................................................................................................................... 4 Data Analysis and findings / results ................................................................ ........................................................ 6 Interpretations and conclusions / summary ................................................................ ........................................... 20 Recommendations ................................................................................................................................................ 22 Limitations of the study ............................................................. ................................................................. .......... 22 Scope for future improvements ............................................................. ................................................................ 22 References ............................................................................................................................................................ 23 Bibliography ......................................................................................................................................................... 23 Questionnaire ....................................................... ................................................................. ................................ 25 Experience & key learnings during the project .......................................................... ........................................... 37
Executive Summary The vision of RPSG Group’s company – Phillips Carbon Black is to be “A trusted Global player providing cutting edge solutions to our Partners and an exciting workplace to our People”, and in order to achieve that, that , the company wishes to know what the partners’ perspective is towards the industry and its growth potential. This study was conducted to understand the industry, how it is growing or de-growing, the kind of expectations the tread rubber manufacturers have from the company and various other questions that were addressed to all the entities in the downstream supply chain ranging from the tread rubber manufacturers, the local/organised retreaders, to both private & public bus and truck fleet operators. The diverse set of respondents gave a deeper understanding of the whole supply chain and how have various factors like radialisation, the advent of Chinese tyres in the Indian market, the poor road transport infrastructure in India have impacted the tyre retreading industry. The findings and conclusions along with the recommendations mentioned herein would help the company devise its marketing strategy accordingly. A primary study coupled with secondary research was carried out to understand the future growth potential of this industry.
Acknowledgement Brief about RPSG – RPSG – Phillips Phillips Carbon Black Limited PCBL, a part of USD 2500 million (or 2.5 billion) RP-Sanjiv Goenka Group, has a business of USD 500 500 million and four strategically located state-of-the-art plants at Durgapur, Palej, Cochin and Mundra. PCBL today is India's largest and globally seventh largest carbon black producer. Set up in collaboration with a US company Phillips Petroleum, PCBL started production in 1962 with 14,000 metric tonnes (MT) of carbon black at Durgapur. Currently, it has a production capacity of 4, 72,000 72,000 MT per annum in India, India, and involves a dedicated capacity of Specialty Blacks of 40,000 MT per annum at Palej. PCBL provides a complete portfolio of products to meet the specific end requirements across Rubber, Plastics, Coatings, Inks and other niche industries globally. The Company has been continuously reinventing itself in order to make the best in class products. Additionally, PCBL's after sales service and strong technical support ensures a fiercely loyal base of customers from around the world. PCBL has etched its global footprints and has a market presence in i n more than 30 nations with decanting stations, st ations, warehouses located near ne ar customer locations. A few of the Company's prized customers are CEAT, MRF, Michellin, Yokohama, Birla Tyres, Goodyear, Sumitomo Tires, Bridgestone, Kumho Tires, among others. PCBL has redefined its business by establishing captive power plants at each factory from the off-gas or waste product from the carbon black manufacturing process thus creating a sustainable green movement. The gas, a by-product of carbon black production, is harnessed for generating electricity electricit y at the Company's Captive Power Plants (CPP), at Baroda, Durgapur, Mundra and Kochi. That is why PCBL is the first car bon black company in the world to receive carbon credits. The Company has heavily cut down on carbon and gas emission, and serves green power to Large Private industrial units and State Electricity utilities.
From the pioneer plant at Durgapur in the East to Kochi plant in the south, Palej and Mundra plants in the west - PCBL footprint spans across India. Wherever PCBL goes, the Company becomes an integral part of the social eco-system. PCBL's more than 50 years' journey to be the cleanest carbon black company is the result of meticulous planning and committed execution. Incorporated in 1960, PCBL started production in December, 1962 using the oil furnace technology. This technology was the most widely accepted manufacturing process of carbon black, patented by its then collaborator and world carbon black leader, Phillips Petroleum Company, USA. Though the collaboration ended after a fruitful relationship, PCBL continued to make considerable progress by making continued and sustained efforts through its technologists, engineers and R&D Activities. In the late 80s, the Company entered into a technical agreement with Columbian Chemicals Company, USA, and updated its technology in order to gain flexibility, better product range, production capacity and energy conservation. Currently, PCBL has an installed capacity of producing 410,000 Metric Tonnes Per Annum (MTPA) of carbon black along with green power capacity of 68 Megawatts (MW). Make an infographic for the journey http://www.pcblltd.com/aboutus/aboutus.php?container=11
About Kochi Plant Kochi Plant Location: Kerala
Established: 1984 Carbon Black Capacity: 40,000 MT/Annum Captive Power Plant Capacity: 10 MW Products Manufactured: All hard blacks Markets catered to: South and West India, South-East Asia Future Plans: Addition of 50,000 MT/Annum soft black line
Competitor Overview
Retreaded Tyre Industry in India Tyre retreading is an established technology in the recycling of worn tyre carcasses. Indeed, the term ‘retread’ was introduced during World War II by ex-army officers summoned up on duty. About 85 – 88% of worn casings can be retreaded and deployed as fresh tyres, and if maintained properly, 80% of casings that have been retreaded once can be retreaded again and reused. An effective functional tyre is made by replacing the old tread with a new one by appropriate processing with suitable rubber compounds. A
correctly retreated tyre is able to provide the same mileage, rolling resistance and other operational properties as a new tyre. The retreaded tyres are tested and their dependability and safety assessed according to the specifications for automobile tyres, truck tyres, off-the-road (OTR) tyres and aircraft tyres (taking into consideration, for example, the eventual extreme strsesses experienced by aircraft tyres). Because of the guaranteed and reliable performances of retreaded tyres but at a lower cost than new tyres, in 1993 the USA allowed retreaded tyres to be used on all government vehicles under a ‘Federal Acquisition, Recycling and Waste Prevention’ order. The foremost advantage of retreading is its cost effectiveness, with a retreaded truck tyre costing one-fifth that of a new truck tyre. Tyre retreading is friendly to the environment as an alternative to buying a new tyre. A considerable amount of energy (equivalent to 84 litres of oil) is consumed in the manufacture of one new truck tyre, whereas 26.5 litres of oil is used to retread a tyre. In the USA, 15 million truck tyres are retreaded, thereby saving 100 million gallons of oil every year. In other words, retreading, via recycling and conservation, contributes to saving Earth’s depleted resources.
(bannerjee book)
Retreaded Rubber Types and Design Pre-cured conventional etc
Literature Review Project Brief Project Title To assess the future market potential of the tyre retreading industry in Kerala in order to ascertain our role as carbon black manufacturers and gain competitive advantage against other players
Activities Involved
Understand the tyre retreading industry Collection of primary data as per the outcomes expected from the report, from tread rubber manufacturers, retreaders, truck / bus fleet owners, and the Kerala State Road T ransport Corporation Collection of secondary data from various sources
Outcome expected
Understand the reasons for retreading being chosen over buying new tyres Understand the advantages being seen by the end users of retreaded tyres Understand the kind of threats the tread rubber manufacturers see / perceive in the market along with their production estimates Understand if there is a consolidation threat looming in the market and its e ffects on the growth of the market
Brief description of the concepts / models introduced in the study ,jbngc
Methodology Used A primary study was conducted to get the responses from the sample that was selected by the stratified sampling method by dividing the whole set of probable respondents into various strata, i.e., tread rubber manufacturers, retreaders, and the truck / bus fleet owners.
Locations Visited The primary study conducted to get the responses required visits to various locations as the entities were located in different areas throughout Kerala. The locations are mentioned below:
1. Manjeri – The Payyanad Industrial Estate houses many Tread rubber manufacturers 2. Edamuttam – One of the customers’ office was located in this area that is about 40 kilometers away from Thrissur 3. Thrissur – The industrial capital houses some of the largest clients of RPSG – Phillips Carbon which made it an essential destination for interviews 4. Kalamassery – Located within the Kochi city, this place has the maximum concentration of retreaders 5. Willingdon Island – This port island hosts the shipping yard and thus cargo carriers. A large number of truck fleet owners are situated in this area. 6. Pallikkara – Located within the Kochi city, this place has most of the private bus fleet owners’ residence in this area 7. Mavellikkara – This small city in Alleppey houses an Industrial estate (SIDCO) that has some major tread rubber manufacturers and retreaders 8. Aluva – With the regional workshop of the Kerala State Road Transport Corporation located in Kochi, a visit was done to understand the market from the point of view of a major consumer of retreaded tyres, while also understanding the growth in the number of buses to be added by the Government in the next couple of years.
Data Analysis and findings / results The interviews of the entities that lie in the downstream supply chain from a Carbon Black manufacturer in the retreading industry were conducted. Their responses were recorded and analysed separately in order to draw conclusions from the data points. This section is divided into sub-sections consisting of the findings for each entit y, namely;
The tread rubber manufacturers that use natural rubber and carbon black to manufacture tread rubber in the forms mentioned in the initial sections The retreaders who then physically after various inspection checks install this tread rubber on used tyres Truck and Bus fleet owners who are the end customers i n this chain
We would start with the tread rubber manufacturers: 1. The respondents that were interviewed possessed the below mentioned pattern (Fig 1) of production Fig 1
Average Production Proportion (in %) 14% 26% 9%
51%
Truck/Bus Radials
Truck/Bus Bias Ply
OTR
Tractor
2. According to the tread rubber manufacturers that were interviewed, their customers gave preference to the values mentioned in the order shown below in Table 1: Table 1 Value Preference Order
Attribute
1
Quality
2
Reasonable Price
3
Credit Facility
4
Brand perception in the Market
5
Location / Proximity
6
After Sales Service
3. The decline as seen by the respondents ranges roughly from 0-50% in the sale s. 4. All the respondents in the form of tread rubber manufacturers believe that consolidation is bound to happen in this industry. 5. While none of the tread rubber manufacturers that were interviewed believed that there is an increase in demand for tread rubber in the future for their business overall, 40%
of the respondents believe that the demand seen by the Agriculture (tractors) and OTR segment is tied with the economy's growth. 6. According to the tread rubber manufacturers that were interviewed, the threats looming in the market are as shown below in Table 2: Table 2 Threat Criticality Order
Attribute
1
Radialisation is on the rise
2
Chinese Tyre Manufacturers are entering India with cheap prices
3
Increased mileage of tyres because of technological advancement
4
Poor road network in most parts of India that damage the tyre body
5
Capital intensive technology for retreading of radial tyres
6
Falling prices of tyres because of competition from Chinese tyres
7
Poor supply of Natural Rubber in India, India being a net importer
8
Recession
7. Although Silica maybe used as a filling material, but 100% of the respondents feel that it could never replace carbon black. 8. Apart from the market in Kerala, these manufacturers supply their tread domestically to Tamil Nadu, Madhya Pradesh, Maharashtra, Karnataka, Andhra Pradesh, Assam and Gujarat. International markets include Sri Lanka and Turkey. 9. The profile of customers that the manufacturers which were interviewed cater to is as mentioned below in Table 3: Table 3 Types of Segments
Average Segment wise distribution
Truck
42.5
Bus
21.5
Agriculture (Tractors)
18
OTR (Mining and JCBs)
11
Passenger
7
10. 60% of the respondents agreed to using SBR along with Natural Rubber 11. While all of the manufacturers that were interviewed were satisfied with the quality of the Carbon Black that PCBL produced, 40% of the respondents weren't happy with the overall procurement process with reasons ranging from non-availability of desired grade to the price being higher than market standards. 12. The production pattern in the last two years as seen by the five manufacturers that were interviewed is as shown below in Table 4 and Fig 2. There is a decline of about 4.47% in the annual production of tread rubber over the last year.
Fig 2
4000
3600
3600
3500 3000 1680
2500
1704
2000
1100
1500
1412.8 800
1000 120
500
140
1349.6
528
540
0 Manufacturer Manufacturer Manufacturer Manufacturer Manufacturer 1 2 3 4 5 2014-15
Average Production
2015-16
Table 4 Year
Average Production (in MT)
2014-15
1412.8
2015-16
1349.6
Decline (in %)
4.47
Let us now look at the findings from the interaction with the retreaders (both organized and unorganized players). 1. As per the retreaders that were interviewed, the average life of a retreaded tyre (Fig 4) is as mentioned below: Fig 4
Average life for a retreaded tyre (in km) 90000 80000
81000 70833.33333
70000 60000 50000 40000
38333.33333
37833.33333
30000 20000 10000 0 Truck Tyres Radial Tyres
Bus Tyres Bias-Ply Tyres
2. Among the retreaders, the below mentioned tread rubber manufacturers were popular due to the reasons mentioned herewith:
a. Midas was the most preferred among the retreaders visited with about 50% opting for Midas due to its quality, availability, variety and brand perception in the market b. Tolins came second as a leading choice for bias ply tyres c. The rest of the players in the market including Hitech, Eastern, Indag, Cochin Rubber, Janatha Rubbers, TVS Treads were preferred because of various reasons ranging from the tread being the owner's brand, to brand value to the extent of it being better than that of Midas (in the case of Indag) 3. Amid tension in the market with apprehensions of demand going down, the retreaders that were interviewed felt that they would see a rise in the number of tyres in the next two years. A brief snapshot of the figures is given below (Fig 5): Fig 5
Growth in the retreaded tyre industry (in %) 35 34 33 32 31 30 29 28 Growth in bias
Growth in radial
Growth in bias
Bus (in %)
Growth in radial
Truck (in %) 2016-17
2017-18
4. The reasons attributed to the average growth as expected b y the retreaders visited during the study were mainly: a. Small retreaders are shutting shop due to increased competition in the market and the need for quality and brand name has improved significantly b. More and more vehicles are coming onto the road with bette r infrastructure, greater need for transportation of raw materials c. Growth of the automobiles sector would fuel this growth, however, due to the nature of life cycle, the growth in the retreading industry is deferred by some time. That is, there is a lag d. One of the retreaders, although not looking towards building any new plants has one of his plants running at half the design capacity e. The unorganised sector's players go together to pitch to the fleet owners to acquire more and more customers, in some cases educate them to the benefits of retreading their tyres 5. Out of the retreaders that were interviewed, 83% believed that the anti-dumping duty (which has been removed) would have helped deter Chinese tyres being dumped into the Indian market
6. Out of the retreaders that were interviewed, 33% check which Carbon Black manufacturer's product is being used by them as they feel that the carbon black has a huge role to play in the tread's mileage and superior performance 7. The decrease in demand that 33% of the players interviewed have faced can be attributed to the onset of consolidation, and the need of better facilities and quality expectations from the point of view of the truck operators since they agreed to put in a huge investment in radial tyres over bias ply. Also, increased mileage is another factor that makes the visits to the retreaders after larger intervals, thus creating a pseudo decline in the demand. 8. A surprising 80% of the retreaders visited feel that due to the increased mileage after each retread and more flexible hence not as strong a carcass used in radial tyres, the retreadability of the tyres has declined 9. Over 83% of the respondents did their business mainly in Kerala either due to tax implications for selling retreaded tyres, or majority of the customers come to their facility to get their tyres retreaded 10. The general perception among the retreaders that were inte rviewed about the carcass being the most suitable for retreading is the greatest for these brands (Table 5): Table 5 Order of preference
Radial Tyres
Bias-Ply Tyres
1
Michelin
MRF
2
Bridgestone
Apollo
3
Apollo
Goodyear
4
MRF
JK Tyres
5
JK Tyres
Bridgestone
11. According to the retreaders that were interviewed, the threats looming in the market are as shown below in Table 6: Table 6 Threats Criticality Order
Attribute
1
Radialisation is on the rise
2
Chinese Tyre Manufacturers are entering India with cheap prices
3
Poor road network in most parts of I ndia that damage the tyre body
4
Increased mileage of tyres because of technological advancement
5
Capital intensive technology for retreading of radial tyres
6
Falling prices of tyres because of competition from Chinese tyres
7
Poor supply of Natural Rubber in India, India being a net impor ter
8
International players entering the market
12. All the retreaders that were interviewed were of the opinion that Bias ply tyres are easier to be retreaded due to various reasons listed below: a. Bias-Ply tyres need much less trained labour to be worked on than radial tyres b. Bias Ply tyres weigh lesser than radial tyres, loading and unloading is a lot easier c. Retreading of radial tyres takes up to 4 times the time taken to retread bias ply tyres
d. The procedure to retread radial tyres is more critical due to higher failure rates in case the steel mesh gets exposed The findings from the interviews I had with the truck fleet operators are mentioned below: 1.
The fleet owners visited in view of the infrastructure development and in hopes of getting more business had plans to expand their fleet of trucks as shown in Table 7: Table 7 In one year (average %)
In two years (average %)
16.17
12.64
Expansion plans
2. Out of the respondents, 40% fleet owners visit only local retreader s, while another 40% utilize the services of both local and organized players for different retreading needs. The remaining 20% rely only on organized players for all their retreading needs. 3. The fleet owners that didn’t prefer to get all their tyres retreaded gave the below mentioned reasons: a. They felt that the cost of retreading radials, and also the failure rate was high b. They prefer to use replacement tyres for trucks in their fleet that cover more than 400 kilometres in a single trip 4. It was remarkable to notice that the fleet owners who had the above mentioned inhibitions, they went to local retreaders for getting their tyres retreaded. 5. Upon interviewing the fleet owners, the reasons behind going for retreaded tyres rather than buying new tyres surfaced in the below mentioned order (Table 8) Table 8 Why retread
Attribute
1
Low cost of retreaded tyres compared to brand new tyres - 30 to 40% of the cost
2
Environmentally safe - uses a lot less crude oil than is used to make a new tyre
3
Required to manage tyre waste
4
Helps in increasing the life of a tyre
6. Once it had been decided to retread their tyres and not buy new ones, the fleet owners considered the below mentioned factors to retread their tyres (Table 9) Table 9 Reasons Order
Attribute
1
Inspection showed tread thickness close to the minimum allowable limit
2
Unplanned, due to tread wear and tear
3
Exhaustion of the mileage as specified by the tyre manufacturer / retreader
4
Fixed time after purchase
7. The information collected from the fleet owners was plotted in the below mentioned graph that shows the average mileage that each bra nd of tyre used by them provides, the estimated average number of retreads that the manufacturer suggests and the actual average number of retreads done on the tyres (Fig 6)
Fig 6 90000
3.5
80000
3
70000 2.5 60000 50000
2
40000
1.5
30000 1 20000 0.5
10000 0
o l l o p A
T A E C
s e r y T K J
F R M
o l l o p A
r a e y d o o G
T A E C
Radial
s e r y T K J
F R M
s e r y T a l r i B
0 Average of Mileage (in km) Tyre manufacturer's Estimate Actual number of retreads done
Bias Ply
8. When the fleet owners which were interviewed were asked about the tread rubber manufacturers they knew of, 40% cared to check the retread rubber that was used in the tyres, while the others trusted the retreader to do quality retreading. Midas was the most trusted and well-known brand among them that dominated mostly because of great quality and a mediocrely reasonable price. This was follo wed by Tolins and TVS Treads, with TVS treads being the brand of the future in their minds. 9. Their current tyre composition and future expectations were understood and it showed that the penetration of radial tyres would increase from 22% to 30% in the truck segment for these fleet owners in the next two years (Fig 7) Fig 7
Tyre composition expectation
30 Radial 22
70 Bias 78
0
10
20
30
40 2017-18
50 Current year
60
70
80
90
10. When the fleet owners were enquired further as to the reasons why they do not currently use radial tyres, the responses were recorded and the below mentioned graph typically captures the reasons specified by them along with the s cores assigned to each reason. (Fig 8) Fig 8
Reasons for not using radial tyres 4 6 6
Scores
17 24 27 0
5
10
15
20
25
30
Vehicles are old, which have had ordinary tyres. Only models bought after 2011 have Radial tyres Non-availability of radial tyres as per the requirement Good experience with ordinary Bias ply Nylon tyres, not willing to make the transition Cheap imports from China are more economical The condition of the roads is bad, tyres get damaged anyway Radial tyres are costlier than indian made bias ply
11. 40% of the respondents use retreaded tyres on the steer wheel positions of trucks that goes through more tension than rear mounted tyres. 12. None of the respondents had an idea about the kind of contribution they make to reduce the impact on environment by using a retreaded tyre. The findings from the interviews of the bus fleet operators are mentioned below: 1.
The fleet owners visited in view of the infrastr ucture development and in hopes of getting more business had plans to expand their fleet of trucks as shown in Table 10: Table 10 In one year (average %)
In two years (average %)
25
11.11
Expansion Plans
2. Out of the respondents, 20% bus fleet owners visit only local retreaders, while another 20% utilize the services of both local and organized players for different needs. The remaining 60% rely only on organized players for all their retreading needs. 3. Upon interviewing the bus fleet owners, the below mentioned reasons behind going for retreaded tyres rather than buying new tyres surfaced i n the below mentioned order (Table 11) Table 11 Why retread
Attribute
1
Low cost of retreaded tyres compared to brand new tyres - 30 to 40% of the cost
2
Environmentally safe - uses a lot less crude oil than is used to make a new tyre
3
Required to manage tyre waste
4. Once it had been decided to retread their tyres and not buy new ones, the bus fleet owners considered the below mentioned factors to retread t heir tyres (Table 12) Table 12 Reasons Order
Attribute
1
Inspection showed tread thickness close to the minimum allowable limit
2
Unplanned, due to tread wear and tear
3
Exhaustion of the mileage as specified by the tyre manufacturer / retreader
4
Fixed time after purchase
5. The information collected from the bus fleet owners was plotted in the below mentioned graph that shows the average mileage that each brand of tyre used by them provides, the estimated average number of retreads that the manufacturer suggests and the actual average number of retreads done on t he tyres (Fig 9) Fig 9 80000
4.5
70000
4 3.5
60000
3
50000
2.5 40000 2 30000
1.5
20000
1
10000
0.5
0
0 JK Tyres
MRF
Apollo
Bismi
CEAT
JK Tyres Michelin
Average of Mileage (in km) Tyre manufacturer's Estimate
Bias Ply
Radial Actual number of retreads done
6. When the bus fleet owners which were interviewed were asked about the tread rubber manufacturers they knew of, 80% cared to check the retread rubber that was used in the tyres, while the others trusted the retreader to do quality retreading. Midas was the most trusted and well-known brand among them that dominated mostly because of great quality and a mediocrely reasonable price. This was followed by Eastern Treads, TVS Treads and Janatha Rubbers, with TVS treads being the brand of the future in their minds. 7. Their current tyre composition and future expectations were understood and it showed that the penetration of radial tyres would increase from 80% to 84% in the bus segment for these fleet owners in the next two years (Fig 10)
Fig 10
Tyre composition expectation 84
Radial 80
16
Bias
20
0
10
20
30
40 2017-18
50
60
70
80
90
Current year
8. When the fleet owners were enquired further as to the reasons why they do not currently use 100% radial tyres, the responses were recorded and the below mentioned graph typically captures the reasons specified by them along with the scores assigned to each reason. (Fig 11) Fig 11
Reasons for not using radial tyres 2 3
Scores
7 7
0
1
2
3
4
5
6
7
8
Not good infrastructure for alignment of retreaded radial tyres in South India Cheap imports from China are more economical The condition of the roads is bad, tyres get damaged anyway Radial tyres are costlier than indian made bias ply
9. 40% of the respondents use retreaded tyres on the st eer wheel positions of buses that goes through more tension than rear mounted tyres. 10. Only 20% of the respondents had an idea about the kind of contribution they make to reduce the impact on environment by using a retreaded tyre.
The information gathered from secondary sources is as under: 1. In the US, there is a law that all the federal government vehicles must get their tyres retreaded. In India, however; no incentive is provided for retreading. The tax r ates are also not in favour of organised players with a tax r ate as high as 22.5% (link 1) 2. Bias- ply tyres’ stiff sidewalls are known to perform well under heavy loads. Also, their inherent lack of flex makes the sidewall to not wear out in a turn as easil y as a radial tyre. (link 51) 3. Using retreaded tyres is environmentally conscious. It takes 22 gallons of crude to produce one new truck tyre. However, only seven gallons of crude oil is used to retread a tyre. When a lot of fleet owners using hundreds or thousands of tyres each year opt for retreading, a significant environmental impact is created. (link 52) 4. Truck radial tyres is one of the fastest growing segment with growth of around 25% in the last two years.(link 53) 5. The ruling government has approved a plan for construction of 1,000 km of highways and expressways at an estimated cost of Rs 16.68 crore. The proposed expressways include Delhi-Chandigarh, Bengaluru-Chennai, Delhi-Jaipur, and Vadodara-Mumbai. (link 54) 6. The production of tyres in the truck & bus segment increased in the past year by about 4% (Fig 12). The Truck and Bus vehicle production grew by a whopping 21% in the first quarter of 2015 (Fig 13). (link 54) Fig 12
Fig 13
7. In India, each year about a million retreaded t yres are produced and around 60% of truck tyres in service are retreads. (link 20)
8. The Truck, Bus, tractors and OTR segment together constitutes around 70% of the tyre production (Fig 14) (link 14) Fig 14
9. The Government of India undertakes the retreading of aircraft t yres of its Air Force which can be seen by an expression of interest rai sed by the Government and also by an Indian Standard IS 15428:2004 for “Retreading of Radial/Cross-Ply tyres for Aircrafts – Specification”. According to another study, all commercial airlines as well as military jet aircrafts use retreaded tyres. In the US, about 80% of all aircraft tyres are retreads. (link 15) 10. The study conducted by CRR in 2008 shows that, the manufacturing of a 17.5” new tyre produces 86.9 kg CO2 emissions compared to 60.5 kg CO2 for a similar retread tyre, and total savings of an estimated 26.4 kg. This equates to a reduction of emissions by 30%. (sharma2014) 11. As the requirement of quality retreading for huge investment in radial tyres grows, the big tyre MNCs would showcase their technological expertise by rolling out tyres that possess high retreadability. Since the small retreaders would not be able to compete with the scale of operations of the tyre majors, there would be a strong consolidation in the market. (beroe) 12. The retreading industry in India is set to grow with a CAGR of 8-10% due to the following reasons: (beroe) a. High penetration of radials in the Truck and Bus segment would provide better retreadability in tyres b. The infrastructure development in terms of National Highway projects will reduce failure rates of tyre bodies c. Government restrictions on truck overloading are set to become stringent making the tyres’ casings to be intact for retreading
13. A study on the requirement of Natural Rubber for the production of retreaded tyres for commercial vehicles shows the below mentioned scenario (Fig 15) (beroe) Fig 15
14. Tyre retreading in India would grow in India and will receive a boost from the growth in radialisation. Retreading is even expected to overtake replacement of tyres after 2018 that is when the effects of radialisation, better road networks, and better government regulations come into play. (beroe) 15. The dumping of Chinese tyres has affected the European market much more than it was anticipated. One example is the RuLa facility in Germany which is now retreading 60% of the tyres it used to retread till two years ago. It is down to 60,000 tyres annually. (retreading business magazine) 16. Radialisation has started penetrating thecommercial vehicle segment in India. Due to this, the focus on quality retreading has improved. In view of this, Apollo Tyres has revamped its operations in this industry after 7 years of dormancy. Apollo’s business is currently growing at an average rate of 18% annuall y. (retreading business magazine) 17. An unusual approach was followed by Spanish t yre recycling agency TNU, which promoted retreading of a tyre as a means of saving water. This highlights the fact that retreading four tyres saves the as much water as the per capita consumption of water in Spain. TNU further explained that retreading not only saves water but also oil, rubber, steel, zinc and other chemicals, not to forget the energy put into making the carcass. (retreading business magazine) 18. According to Eastern Treads, the market size of this industry stood at Rs. 3200 crores with domestic growth set to rise with a double digit CV sales growth in the next few years. Eastern also pointed out that Rail freight char ges have gone up by over 50% from FY12 to FY16, while the road freight charges have remained unchanged or fluctuated with the oil prices. 19. The commercial vehicles segment is expected to grow at a CAGR of 30.9% during FY2015-FY2020 (link 55)
20. More than one-third of the retreading market is unorganized. These players can quote 20% lower prices because of that. Still, quality and sense of investment are making the fleet owners to choose organized players over unorganized players. This scenario would further move towards consolidation as radialisation penetrates into the Indian market. 21. The customs duty levied on the import of Natural Rubber is higher than the duty levied on the import of tyres. This move only hampers the Indian tyre industry and makes the Chinese dumping smoother.
Interpretations and conclusions / summary 1. The current production pattern of pre-cured treads is in line with the penetration of radial tyres in the Truck & Bus segment that is poised at 25% and expected to reach 50% by the year 2020. 2. While the reasons of going for retreaded tyres is the cost savings it brings and it being environmentally safer than buying a new tyre, there are inhibitions looming about quality and efficient retreading of radial tyres. 3. Even the adoption of radial tyres isn’t as much as in the west which can be attributed to high cost of radial tyres and the poor quality of roads in India which are not suitable for radial tyres. 4. The average life of a radial tyre as depicted by the study is about 1.8-2.1 times higher than a bias-ply tyre, thus the trips between subsequent retreads would increase substantially. 5. The retreadability has seen a decline because of the flex nature of radial tyres that puts a lot of stress on the carcass. The carcass of a bias-ply tyre is stiff, making it a lot stronger than a radial tyre. 6. On an average, a bias-ply tyre is thus retreaded more number of times than a radial t yre. This could also be attributed to higher mileage that fleet operators enjoy even with less number of retreads for radial tyres. 7. A higher demand for quality over price by the retreaders exists in the market. This means that even though the local retreaders who offer services at 20% lower prices, the organized players with greater technological expertise would be preferred. 70% of the visited fleet owners testified this fact. Furthermore, GST implementation could standardise the taxes for each entity and lead to a harmonizing of margin, making it impossible for local retreaders to keep up the prices they offer currently. All these factors would lead to a major consolidation in the market. 8. This consolidation would be fuelled by the rapid entry of major tyre manufacturers offering quality retreading and fierce competition because of their economies of scale. 9. Although sales of some players has declined, others have seen a rather stable demand. This could be the effect of consolidation. 10. The OTR and tractors are tied to the economy which is expected to grow at 6-8% in FY17. A higher demand in case of OTR and tractor tyres can be seen in FY17. The agriculture sector alone is expected to grow by 8% this year. 11. The retreaders and tread rubber manufacturers think on similar lines on radialisation being the biggest threat to this industry followed by dumping of Chinese tyres and the poor road network infrastructure in India. The poor road infrastructure has been addressed by the current Government by kickstarting various development projects. However, little has been done in case of checking the dumping of Chinese tyres and protecting the Indian tyre industry. The duty on import of Chinese tyres is still very low. The impact of Chinese tyres dumping has had detrimental effects on the German retreading industry, for example, the volume of retreaded tyres for RuLa facility in Germany has gone down from 1,00,000 tyres to 60,000 t yres annually. 12. As per the study, Silica would not replace Carbon Black as a filler / re-enforcer in the retreading industry 13. Keeping customers satisfied and mitigating issues like non-availability of a particular grade of Carbon Black or improper prices (both with respect to the market and among
regions) would become imperative as the number of players would come down and the tyre majors enter the market with full swing. Midas, Tolins, TVS Treads and Eastern Treads emerged as the most preferred tread rubber manufacturers among the retreaders, thus making these customers important as clouds of consolidation loom over the industry. 14. High tax implications and low duty on import of Chinese tyres are hampering the tyre and retreaded tyre industry. 15. While a major focus still lies in the truck & bus segment for retreading of tyres, there is huge scope of retreading in pick-up trucks and aircraft tyres. 80% of the aircraft tyres in the US are retreaded. In India, the Indian Air Force issues tenders for retreading of its aircraft tyres. The retreading is not limited to military aircrafts but also commercial airplanes. A typical aircraft tyre can be retreaded up to 8-10 times.
Recommendations 1. In view of the consolidation that is expected in the market based on conclusion from the study, the small retreaders and small to medium tread rubber manufacturers would start shutting shop. This would mean that a greater focus on keeping organised players happy and committed as customers by an aggressive marketing strategy and operational efficiency would work in the company’s favour. 2. A lot of MNCs are entering the retreading business with Michelin tieing up with TVS, and Apollo Tyres expanding in this industry again after staying dormant for over 7 years. Thus, by leveraging our ties with leading tyre manufacturers like JK Tyres, Michelin etc, we can build a customer in them for the non-tyre industry as well.
Limitations of the study 1. The strength of a questionnaire lies in the nature and language of the questions it contains. There was a language mismatch between the interviewer and the respondents, due to which the questions were asked differently to each respondent. This might have led to some errors or loss of information in translation. 2. Most of the fleet operators / customers that get their truck/bus tyres retreaded from local/organised players are not based in Kerala. Thus, triangulating and interviewing fleet operators was a major hurdle. Only small fleet operators are present here. 3. Large players like Midas and Eastern Treads in the genre of Tread Rubber Manufacturers were impregnable due to non-availability for appointment / meeting. 4. Only secondary data was used for gauging the demand and future potential of the OTR (Mining) segment and aircraft tyres.
Scope for future improvements 1. A larger segment of manufacturers / retreaders / fleet owners may be interviewed to expand the database for more efficient analysis of the data. The current sample may not fully represent the population. 2. The study may be expanded to Tamil Nadu and Maharashtra for visiting the fleet owners since their trucks / buses that ply in Kerala get their tyres retreaded by either the local or organised retreaders here. 3. Understanding the industry from both the sides of small scale and large scale manufacturers can be done. This would give better data points for a more efficient analysis. 4. During one of the field visits, it surfaced that some of the tread rubber manufacturers are manufacturing tread rubber for Autos, Two-wheelers, small pick-up trucks (example Tata Ace) etc. A bigger market than it is currently expected by considering the above mentioned segments coupled with Tractors in the Agriculture sector, Aircraft tyres, and JCBs in the OTR segment can be researched and explored with a greater focus.
References 1.
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Questionnaire 1.
Questionnaire for the Tread Rubber Manufacturers
2.
Questionnaire for the Tyre Retreaders
3.
Questionnaire for truck / bus fleet owners
4.
Questionnaire for Kerala State Road Transport Corporation\
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